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The monopolist has total fixed costs of $60 and has a constant marginal cost of $15

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The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production?

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The demand curve facing the monopolist is given below:

 

Price Quantity
$51 1
$47 2
$42 3
$36 4
$29 5
$21 6
$12 7

We first compute the total revenue and marginal revenue at different level of production:

 

Price Quantity Total revenue Marginal revenue
$51 1 $51 -
$47 2 $94 $43
$42 3 $126 $32
$36 4 $144 $18
$29 5 $145 $1
$21 6 $126 -$19
$12 7 $84 -$42

The monopolist will produce until marginal revenue is not lower than the marginal cost. At Q = 4, the marginal revenue is $18, which is higher than the marginal cost of $15. At Q = 5, the marginal revenue is $1, which is lower than the marginal cost. Thus the profit-maximizing level of production is Q = 4.